Hyper-competitive retail industry looks to supply chains for differentiation and profitability

Retailers seeking to find balance between omnichannel costs and revenue growth see supply chain capabilities as key to profitably serving customers, according to a recent report by Auburn University’s Center for Supply Chain Innovation and the Retail Industry Leaders Association (RILA), in partnership with DC Velocity, titled “2017 – The State of the Retail Supply Chain.” The report provides in-depth analysis of the front-burner issues facing America’s retail supply chains and highlights tools and leading practices to compete in an evolving marketplace.

The report asserts that supply chain executives must integrate operations across multiple channels, use analytics to drive supply chain decisions and monetize supply chain capabilities. It also details the top three supply chain capabilities that revolve around the digital transformation of the retail industry as driven by the evolving consumer: enhancing order fulfillment capabilities, incorporating extensive use of stores for fulfillment and end-to-end supply chain planning.

As retail supply chains continue to excel at its primary fulfillment, that role can no longer be channel-specific. Supply chains must be integrated in a way that optimizes the use of brick-and-mortar stores that were never designed for large-scale fulfillment. Omnichannel is the logical retail strategy, but customers don’t care about channels or supply chains. They just want choice, speed, low cost and positive experiences and retailers must keep that top of mind.

The report challenges retail supply chain executives to figure out how to best integrate their operations so that channels are transparent to customers and service is world-class. Predictive analytics plays a critical role in providing accuracy, timeliness, and consistency at a reasonable cost. According to the report, supply chain professionals are putting more emphasis on these forward-looking tools that will help them diagnose problems, predict demand, and prescribe action.

Other Key Findings Include:

–Blockchain is the next big candidate to disrupt the retail supply chain. A blockchain is a data structure that makes it possible to create and share a digital ledger of transactions. It uses cryptography to allow anyone granted access to add to the ledger in a secure way without the need for a central authority. From a supply chain standpoint, blockchain combines unit level entity identification, digital marginal cost economics, and 21st-century cybersecurity to promise an infinitely scalable system of supply chain visibility. Among other benefits, blockchain supports whole chain visibility so that retailers can trace the origin of products for the growing number of consumers that value sustainability and environmental stewardship.

–Urban fulfillment centers are seen as the next battleground in retail logistics. Cities have the customer and order density needed for cost-efficient omnichannel retailing. As people move back to urban centers, particularly millennials, selling and deliver groceries, staples, and lifestyle products to them will become more mainstream.

To meet the need for urban fulfillment, retailers will need enough inventory in locations that can rapidly serve this demand. Traditional urban retail stores are small and often stock only enough product to satisfy walk-in traffic. DCs are typically located outside the urban core may not be able to meet delivery deadlines. Urban fulfillment strategies will need to be implemented to seize this opportunity. Shared spaces, hybrid store- fulfillment centers, and facility conversions could be solutions to close this last mile gap.

To read a full copy of the report, click here.